Dec 06, 2004—On Aug. 30, I offered to bet anyone who would take up the challenge that end users would be able to buy passive UHF RFID tags for 5 cents in volumes of 1 million or more by the end of 2008 or sooner (see The 5-Cent Challenge). The bet expires at the end of this year, and so far, no one has taken me up on it. I'm not surprised, but I am a little disappointed.

I made the offer for two reasons. First, I wanted to illustrate as clearly as I could that CEOs have to make business decisions based on what they believe is likely to happen—given the history of other technologies, market demands, business needs and other factors—and not on what some analyst says he or she thinks will happen after doing a little bit of research. I launched RFID Journal because I believed that RFID technology was the only way companies could get accurate, real-time data into their systems and transform their supply chains. It’s a good thing I didn’t listen to analysts’ predictions. None thought RFID would be as hot as it is today, and several told me I was nuts to think RFID Journal could succeed.

The second reason I issued the challenge was because I was hoping someone would step forward with a clear and well-reasoned explanation of why tag costs won't fall to 5 cents. Lots of people say it will never happen, but what facts back up their claim? There are, in fact, some serious obstacles to achieving a 5-cent tag. I'll spell them out as best I can so that readers can make their own judgments about what the price of tags is likely to be in five years.

Silicon is not the issue. Semiconductor companies are very good at churning out billions of microchips. They can make the chips small enough that, in very high volumes (30 billion or more), the cost of each one falls to 1.15 cents.

I certainly believe we will get to 30 billion tags by 2008. Albertsons, Metro, Target, Tesco and Wal-Mart handle close to 10 billion cases combined each year. Other consumer goods retailers are likely to quickly follow their lead. But RFID is moving into other industries as well. Best Buy is pushing the technology into the electronics industry supply chain. The U.S. Department of Defense is stimulating adoption in defense industry, and Airbus and Boeing are promoting RFID use in the airplane manufacturing sector. And the pharmaceutical industry is already moving toward item-level tracking. Given the size of these industries, 30 billion tags hardly seems unreasonable.

The real challenge is assembling billions of tags, which means attaching a metal antenna to electrical pads on a microchip about the size of the period at the end of this sentence. It has to be done quickly, the adhesive has to dry quickly and the bond has to be strong enough to ensure that the antenna-chip connection lasts for the lifetime of the tag.

Alien Technology has invested millions in developing Fluidic Self-Assembly, a process for placing ultra-small microchips into "straps" that could be connected to antennas and turned into RFID labels. Matrics (now Symbol Technologies) has developed something called Parallel Integrated Chip Assembly (PICA), which attaches several chips to tags simultaneously, rather than one by one (see Matrics Unveils PICA Machine).

SmartCode of Israel says it has a means of mass assembling inexpensive tags (see Startup Claims RFID Breakthrough), but has been hush-hush about how its assembly technology works. Texas Instruments recently said it was working with label partners to develop technology that would enable TI's partners to mass produce RFID labels (see TI Lays Out Path to 5-Cent Tag). And no doubt other companies are investing time and money to try to solve the problems associated with producing billions of tags.

None of the assembly technologies above are proven, since there isn't the demand to produce billions of tags today. And even if one or more of these companies succeed, there are other obstacles to overcome. Metal antennas are expensive and can't be recycled. Many companies want to move toward using conductive inks. But most conductive inks have metal in them, and in many countries around the world, metallic inks cannot be put in landfills. That means you won't be able to throw away boxes with antennas printed on them.

One option would be to develop conductive polymer inks that are not harmful to the environment, but I'm told that antennas printed with polymer inks don't have the same performance as metallic ink antennas. So the ink industry needs to come up with a solution that is cheap, delivers the performance needed and is environmentally safe.

Yes, these are tall orders, but I still feel confident that I’d win the $10,000 bet. There is a huge market need for low-cost chips. And there’s enough money, talent and creativity to find a way to overcome these obstacles and achieve a 5-cent tag. If you think I'm putting too much faith in the capitalist system, you still have time to accept my challenge.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.